Instructions For Schedule H (Form 1120-F) - 2016 printable pdf download

2016

Department of the Treasury

Internal Revenue Service

Instructions for Schedule H

(Form 1120-F)

Deductions Allocated to Effectively Connected Income Under Regulations Section

1.861-8

section 1.882-5 and is reported on

section 1.861-8T. This treaty-based

Section references are to the Internal

Revenue Code unless otherwise noted.

Schedule I (Form 1120-F). See

reporting is permitted only if the

Regulations section 1.882-5(a)(2).

applicable income tax treaty and

Future Developments

Bad debt expense allocated to ECI is

accompanying documents (such as

For the latest information about

reported directly on Form 1120-F,

Exchange of Notes) expressly provide

developments related to Schedule H

Section II, line 15.

that attribution of business profits to a

(Form 1120-F) and its instructions,

U.S. permanent establishment is

Purpose of Schedule

such as legislation enacted after they

determined under OECD Transfer

were published, go to

Pricing Guidelines applied by analogy.

Schedule H (Form 1120-F) is used by

See the Instructions for Schedule M-3

a foreign corporation that files Form

(Form 1120-F) for the reporting of

1120-F to report the amount of the

General Instructions

book-tax differences in Parts II and III

foreign corporation's deductible

of that schedule under a treaty-based

expenses that are allocated and

Regulations section 1.861-8.

return position pursuant to OECD

apportioned under Regulations

Under section 882(c), a foreign

Transfer Pricing Guidelines. See also

sections 1.861-8 and 1.861-17 and

corporation's expenses are deductible

Form 8833, Treaty-Based Return

Temporary Regulations section

against its U.S. taxable income only if

Position Disclosure Under Section

1.861-8T between ECI and non-ECI.

they are connected with income

6114 or 7701(b).

The results reported on Schedule H

effectively connected with the conduct

are included on Form 1120-F,

of a trade or business in the United

Specific Instructions

Section II, line 26; and, for banks only,

States (“ECI”). The proper allocation

on Schedule M-3 (Form 1120-F), Part

and apportionment of deductions for

III, line 31.

Part I – Home Office

this purpose is generally determined

Deductible Expenses

under the provisions of Regulations

Who Must File

section 1.861-8 and Temporary

Definitely Related Solely

Any foreign corporation that is

Regulations section 1.861-8T, with

to ECI or Non-ECI

required to file Form 1120-F and is (or

special rules for the allocation and

is treated as) engaged in a trade or

Part I is used to identify the total

apportionment of research and

business within the United States at

expenses, including interest expense

experimentation expenses at

any time during the tax year must

and bad debt expense, recorded on

Regulations section 1.861-17. Under

complete Schedule H and attach it to

the corporation's home office books;

these regulations, a taxpayer must

its Form 1120-F.

to report adjustments made to

allocate deductions to the class of

determine the amounts that are

gross income to which the deduction

Protective returns. If the foreign

deductible for U.S. tax purposes; and

is definitely related and then, if

corporation files a protective Form

to report the portion of the adjusted

necessary, apportion deductions

1120-F under Regulations section

expenses that are definitely related to

among the groups of income included

1.882-4(a)(3)(vi), Schedule H need

ECI and non-ECI. To the extent

in the class. Generally, deductions are

not be completed or attached to the

included in the home office records

allocated and apportioned on the

protective Form 1120-F.

used to report total home office

basis of the factual relationship

Treaty-based return reporting of

expenses, interest expense and bad

between the deduction and gross

business profits attributable to a

debt expense are also identified on

income. (Under section 882(c)(1)(B),

U.S. permanent establishment. Do

Schedule H and removed from

charitable contributions that are

not complete Schedule H if the

expenses allocated and apportioned

deductible under section 170 reduce

corporation files Form 1120-F

under Regulations sections 1.861-8

ECI whether or not connected with

pursuant to an income tax treaty to

and 1.861-17 and Temporary

such income.) Use Schedule H (Form

report business profits attributable to

Regulations section 1.861-8T.

1120-F) to report expenses, other

a U.S. permanent establishment and

Deductions reported on home office

than interest expense and bad debt

applies OECD Transfer Pricing

books may include expenses incurred

expense, allocated and apportioned

Guidelines in lieu of the ECI and

outside the foreign corporation's

to ECI and non-ECI. Interest expense

expense allocation and apportionment

home country (other than in the

of a foreign corporation is allocated to

rules of section 882(c) and

United States). Home office

ECI exclusively (except to the extent

Regulations sections 1.861-8 and

deductions do not include deductions

provided in certain tax treaties) under

1.861-17 and Temporary Regulations

that are reported on books and

the rules provided in Regulations

Jun 13, 2016

Cat. No. 50605P

Instructions For Schedule H (Form 1120-F) - 2016

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